10 4 Financial Statements-Word - Amazon Web Services · 4401 Dominion Boulevard Glen Allen, Virginia 23060 Tel: 804.747.0000 CARITAS Consolidated Financial Statements June 30, 2018

4401 Dominion Boulevard Glen Allen, Virginia 23060

Tel: 804.747.0000 www.keitercpa.com

CARITAS

Consolidated Financial Statements

June 30, 2018 and 2017

CARITAS

Table of Contents

Page Report of Independent Accountants 1 Financial Statements:

Consolidated Statements of Financial Position 3

Consolidated Statements of Activities 5

Consolidated Statements of Cash Flows 9

Consolidated Statements of Functional Expenses 11

Notes to Consolidated Financial Statements 13 Supplemental Information:

Consolidating Schedule – Statement of Financial Position – 2018 27

Consolidating Schedule – Statement of Activities – 2018 29

Certified Public Accountants & Consultants 4401 Dominion Boulevard Glen Allen, VA 23060 T:804.747.0000 F:804.747.3632

www.keitercpa.com

REPORT OF INDEPENDENT ACCOUNTANTS

Board of Directors CARITAS Richmond, Virginia Report on the Consolidated Financial Statements We have audited the accompanying consolidated financial statements of CARITAS and Subsidiaries (collectively, the “Organization”), which comprise the consolidated statements of financial position as of June 30, 2018 and 2017, and the related consolidated statements of activities, cash flows, and functional expenses for the years then ended, and the related notes to the consolidated financial statements. Management's Responsibility for the Consolidated Financial Statements Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with accounting principles generally accepted in the United States; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of CARITAS and Subsidiaries as of June 30, 2018 and 2017, and the changes in their net assets and their cash flows for the years then ended in accordance with accounting principles generally accepted in the United States. Supplemental Information Our audits were conducted for the purpose of forming an opinion on the consolidated financial statements as a whole. The consolidating schedules, as identified in the table of contents, are presented for purposes of additional analysis and are not a required part of the consolidated financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the consolidated financial statements. The information has been subjected to the auditing procedures applied in the audits of the consolidated financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the consolidated financial statements or to the consolidated financial statement themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States. In our opinion, the information is fairly stated in all material respects in relation to the consolidated financial statements as a whole. Prior Period Adjustments As described in Note 16 to the consolidated financial statements, the Organization did not properly account for capitalization of certain construction work in progress in the 2016 and 2017 consolidated financial statements. The omissions were discovered by management subsequent to the issuance of our audit report on the 2017 consolidated financial statements, dated November 8, 2017. Accordingly, the beginning of year net assets, end of year net assets, and property and equipment balances on the 2017 consolidated statement of activities have been restated.

November 14, 2018 Glen Allen, Virginia

CARITAS

Consolidated Statements of Financial Position June 30, 2018 and 2017

See accompanying notes to consolidated financial statements.

3

Assets 2018 2017

Current assets:

Cash and cash equivalents 1,054,728$ 1,241,411$ Unconditional promises to give, current 2,256,296 985,248 Investments in marketable securities 5,281,267 2,448,332 Inventory 96,685 90,255 Prepaid expenses 14,916 9,517 Deposits 20,065 23,885

Total current assets 8,723,957 4,798,648

Property and equipment, net 5,448,369 3,069,327

Other assets:Unconditional promises to give, net of current portion

and discount 2,786,113 340,744 Beneficial interest in assets held at

The Community Foundation 671,145 647,628

Total other assets 3,457,258 988,372

Total assets 17,629,584$ 8,856,347$

CARITAS

Consolidated Statements of Financial Position, Continued June 30, 2018 and 2017


4

Liabilities and Net Assets 2018 2017

Current liabilities:

Accounts payable and accrued expenses 273,960$ 93,607$ Funds held for others 40,283 50,762 Current portion of long-term debt - 140,354 Current portion of capital lease obligation 15,514 15,561

Total current liabilities 329,757 300,284

Non-current liabilities:

Long-term debt, net of current portion - 30,098 Capital lease obligation, net of current portion 23,715 39,181

Total liabilities 353,472 369,563

Net assets:Unrestricted:

Undesignated - available for general activities 6,862,894 4,434,489 Board designated for an operating reserve 215,000 215,000 Board designated - assets held at


7,704,699 5,228,519 Temporarily restricted 9,500,815 3,189,667 Permanently restricted 68,598 68,598

Total controlling interest in net assets 17,274,112 8,486,784

Non-controlling interest 2,000 -

Total net assets 17,276,112 8,486,784

Total liabilities and net assets 17,629,584$ 8,856,347$

CARITAS

Consolidated Statement of Activities Year Ended June 30, 2018 with Comparative Totals for 2017


5

2017

Unrestricted

Temporarily

Restricted

Permanently

Restricted Total Total

Revenue and support:Grants and contributions:

Capital campaign for the CARITAS Center -$ 8,633,814$ -$ 8,633,814$ 3,364,078$ Congregations, individuals and business 1,159,454 - - 1,159,454 1,259,098 Foundations 543,539 100,000 - 643,539 352,000 In-kind contributions 661,648 - - 661,648 756,563 Government funding 744,822 75,000 - 819,822 839,606 United Way Service 98,297 95,490 - 193,787 243,699 AmeriCorps 228,709 - - 228,709 234,034

Program fees 425,746 - - 425,746 415,051 Special event income 73,630 - - 73,630 80,236 Special projects revenue 145,328 - - 145,328 82,836 Miscellaneous revenue 61,369 - - 61,369 58,322 Change in value of beneficial interest in assets

held at The Community Foundation 47,775 - - 47,775 63,056 Rental income 26,462 - - 26,462 31,547 Realized gain on sale of investments 19,765 - - 19,765 8,379 Unrealized gain on investments 21,210 - - 21,210 53,715 Gain on sale of equipment 3,360 - - 3,360 - Investment income 37,890 - - 37,890 10,575

Total revenue and support 4,299,004 8,904,304 - 13,203,308 7,852,795

Net assets released from restrictions 2,593,156 (2,593,156) - - -

2018

CARITAS

Consolidated Statement of Activities, Continued Year Ended June 30, 2018 with Comparative Totals for 2017


6

2017

Unrestricted

Temporarily

Restricted

Permanently

Restricted Total Total

Expenses:Program services 3,733,309$ -$ -$ 3,733,309$ 3,779,917$ Management and general 383,925 - - 383,925 318,403 Fundraising 298,746 - - 298,746 322,052

Total expenses 4,415,980 - - 4,415,980 4,420,372

Change in net assets 2,476,180 6,311,148 - 8,787,328 3,432,423 -

Net assets, beginning of year, as restated(see Note 16) 5,228,519 3,189,667 68,598 8,486,784 5,054,361

Controlling interest, end of year 7,704,699 9,500,815 68,598 17,274,112 8,486,784

Non-controlling interest, end of year 2,000 - - 2,000 -

Net assets, end of year 7,706,699$ 9,500,815$ 68,598$ 17,276,112$ 8,486,784$

2018

CARITAS

Consolidated Statement of Activities Year Ended June 30, 2017


7

Unrestricted

Temporarily

Restricted

Permanently

Restricted Total


Capital campaign for the CARITAS Center 278,489$ 3,085,589$ -$ 3,364,078$ Congregations, individuals and business 1,259,098 - - 1,259,098 Foundations 352,000 - - 352,000 In-kind contributions 756,563 - - 756,563 Government funding 839,606 - - 839,606 United Way Service 139,621 104,078 - 243,699 AmeriCorps 234,034 - - 234,034

Program fees 415,051 - - 415,051 Special event income 80,236 - - 80,236 Special projects revenue 82,836 - - 82,836 Miscellaneous revenue 58,322 - - 58,322 Change in value of beneficial interest in assets

held at The Community Foundation 63,056 - - 63,056 Rental income 31,547 - - 31,547 Realized gain on sale of investments 8,379 - - 8,379 Unrealized loss on investments 53,715 - - 53,715 Investment income 10,575 - - 10,575

Total revenue and support 4,663,128 3,189,667 - 7,852,795

Net assets released from restrictions 505,632 (505,632) - -

CARITAS

Consolidated Statement of Activities, Continued Year Ended June 30, 2017


8

Unrestricted

Temporarily

Restricted

Permanently

Restricted Total

Expenses:Program services 3,779,917$ -$ -$ 3,779,917$ Management and general 318,403 - - 318,403 Fundraising 322,052 - - 322,052

Total expenses 4,420,372 - - 4,420,372

Change in net assets 748,388 2,684,035 - 3,432,423

Net assets, beginning of year, as restated (see Note 16) 4,480,131 505,632 68,598 5,054,361

Net assets, end of year, as restated (see Note 16) 5,228,519$ 3,189,667$ 68,598$ 8,486,784$

CARITAS

Consolidated Statements of Cash Flows Years Ended June 30, 2018 and 2017


9

2018 2017

Cash flows from operating activities:Change in net assets 8,787,328$ 3,432,423$ Adjustments to reconcile change in net assets to netcash from operating activities:

Depreciation 123,584 131,683 Realized gain on sale of investments (19,765) (8,379) Unrealized gain on investments (21,210) (53,715) Gain on sale of equipment (3,360) - Change in value of beneficial interest in assets

held at The Community Foundation (47,775) (63,056) Contributions restricted for long-term purposes (5,289,955) (2,418,248) Change in operating assets and liabilities:

Unconditional promises to give (3,716,417) (873,020) Inventory (6,430) 8,015 Prepaid expenses (5,399) 26,582 Deposits 3,820 (15,500) Accounts payable and accrued expenses 180,353 (8,422) Funds held for others (10,479) 10,199

Net cash (used in) provided by operating activities (25,705) 168,562

Cash flows from investing activities:Proceeds from the sale of property and equipment 6,500 - Purchases of property and equipment (2,505,766) (572,369) Proceeds from sale of investments 103,023 104,123 Purchase of investments (2,894,983) (1,946,264) Proceeds from beneficial interest in assets held at


Net cash used in investing activities (5,266,968) (2,390,150)

Cash flows from financing activitiesProceeds from issuance of noncontrolling interest 2,000 - Contributions restricted for long-term purposes 5,289,955 2,418,248 Payments on capital lease obligation (15,513) (8,906) Principal payments on long-term debt (170,452) (136,400)

Net cash provided by financing activities 5,105,990 2,272,942

CARITAS

Consolidated Statements of Cash Flows, Continued Years Ended June 30, 2018 and 2017


10

2018 2017

Net change in cash and cash equivalents (186,683)$ 51,354$

Cash and cash equivalents:Beginning of year 1,241,411 1,190,057

End of year 1,054,728$ 1,241,411$

Supplemental disclosure of cash flow information:Cash paid during the year for interest - expensed 5,355$ 8,438$

Cash paid during the year for interest - capitalized 16,802$ -$

Non-cash transactions:Acquisition of property and equipment throughcapital lease obligation -$ 63,648$

CARITAS

Consolidated Statement of Functional Expenses Year Ended June 30, 2018 with Comparative Totals for 2017


11

2017

Program

Services

Management

and General Fundraising Total Total

Salaries and wages 1,714,465$ 163,211$ 219,256$ 2,096,932$ 2,018,871$ Furniture Bank distributions 647,098 - - 647,098 760,232 Transportation 257,620 1,025 - 258,645 258,260 Occupancy 210,785 54 60 210,899 205,601 Utilities 169,640 1,173 1,320 172,133 162,666 Employee benefits 127,827 11,751 20,281 159,859 140,325 Payroll taxes 125,828 21,303 12,370 159,501 155,061 Depreciation 106,127 12,179 5,278 123,584 131,683 Repairs and maintenance 61,371 36,943 91 98,405 90,267 Supplies 88,911 2,699 549 92,159 72,552 Professional fees - 85,009 - 85,009 65,095 Insurance 72,933 1,912 718 75,563 85,333 Food 65,105 - - 65,105 81,153 Telephone 26,218 10,458 831 37,507 35,075 Special events 1,657 187 27,191 29,035 48,926 Special projects 26,365 42 - 26,407 34,528 Conferences, conventions and meetings 11,029 6,499 1,051 18,579 11,994 Bank charges - 18,534 - 18,534 14,038 Printing and publications 428 3,874 7,166 11,468 19,104 Miscellaneous 7,346 1,030 - 8,376 1,456 Interest 4,165 1,190 - 5,355 8,438 Mileage 3,602 963 - 4,565 3,611 Client assistance 3,610 - - 3,610 10,416 Marketing and advertising - 1,634 1,794 3,428 1,473 Postage and shipping 349 1,786 790 2,925 2,680 Employment recruiting 830 469 - 1,299 1,534

3,733,309$ 383,925$ 298,746$ 4,415,980$ 4,420,372$

2018

CARITAS

Consolidated Statement of Functional Expenses Year Ended June 30, 2017


12

Program

Services

Management

and General Fundraising Total

Salaries and wages 1,668,826$ 134,280$ 215,765$ 2,018,871$ Furniture Bank distributions 760,232 - - 760,232 Transportation 257,068 1,192 - 258,260 Occupancy 205,454 82 65 205,601 Utilities 160,495 1,022 1,149 162,666 Employee benefits 109,995 11,484 18,846 140,325 Payroll taxes 123,098 19,736 12,227 155,061 Depreciation 114,875 11,372 5,436 131,683 Repairs and maintenance 58,316 31,645 306 90,267 Supplies 65,271 6,646 635 72,552 Professional fees - 65,095 - 65,095 Insurance 79,935 4,336 1,062 85,333 Food 79,717 - 1,436 81,153 Telephone 28,939 5,028 1,108 35,075 Special events 156 - 48,770 48,926 Special projects 34,528 - - 34,528 Conferences, conventions and meetings 7,716 3,422 856 11,994 Bank charges - 14,038 - 14,038 Printing and publications 1,800 4,438 12,866 19,104 Miscellaneous - 1,456 - 1,456 Interest 8,438 - - 8,438 Mileage 2,843 690 78 3,611 Client assistance 10,416 - - 10,416 Marketing and advertising 120 1,310 43 1,473 Postage and shipping 212 1,064 1,404 2,680 Employment recruiting 1,467 67 - 1,534

3,779,917$ 318,403$ 322,052$ 4,420,372$

CARITAS

Notes to Consolidated Financial Statements

13

1. Organization and Business:

CARITAS is a Virginia non-stock organization that helps its most vulnerable neighbors break the cycles of homelessness and addiction to reclaim their dignity. CARITAS receives substantially all of its public support from various sources in the Richmond metropolitan community and is exempt from federal income taxes as a not-for-profit as defined in Section 501(c)(3) of the Internal Revenue Code. CARITAS has developed four distinct programs to promote its mission. It leverages proven programs and innovative partnerships to fill gaps in the community by creating sustainable 21st Century solutions to homelessness and addiction.

Shelter – CARITAS offers separate family and adult services and is the largest and most inclusive emergency shelter in Central Virginia providing food, shelter, client assistance, and a pathway back to self-sufficiency. CARITAS helps more than 1,000 individuals annually by leveraging the support of over 160 congregations and 15,000 volunteers and professional case managers. Furniture Bank – CARITAS accepts donations of new and gently used furniture, kitchenware, linens, and basic household items at Central Virginia’s only furniture bank, which serves more than 800 families annually. Equipped with basic household goods, these families can dedicate their resources to breaking the cycle of homelessness and poverty. Works – CARITAS runs an intensive 5-week job-readiness program for men and women with significant barriers to employment including homelessness, addiction, and felony convictions. Works’ students leave the program equipped to live independently and thrive in the community. The Healing Place – CARITAS operates a 188-bed shelter and long-term residential recovery program for men struggling with substance use disorder. The facility includes a 24/7 emergency shelter, orientation program, recovery program, medical clinic, transitional program, and aftercare services.

Effective May 26, 2016, CARITAS Center, LLC, a Virginia limited liability company of which CARITAS was the sole member, was formed with the purpose of acquiring, financing, developing, owning, maintaining, improving, operating, leasing, and, if appropriate, selling or otherwise disposing of real property (the “CARITAS Center”) in support of the CARITAS’s strategic goals. Effective December 19, 2017, in connection with earning federal and state historic tax credits and new market tax credits, CARITAS established CARITAS Structure, Inc., a Virginia corporation of which CARITAS is the sole member. Concurrently, ownership of CARITAS Center, LLC was amended to reflect a 95% membership interest of CARITAS Structure, Inc. and a 5% non-controlling membership interest of an affiliate (the “Affiliate Interest”).

CARITAS

Notes to Consolidated Financial Statements, Continued

14

1. Organization and Business, Continued:

Additionally, effective December 19, 2017, CARITAS Center Tenant, LLC, was formed for the future purpose of leasing the CARITAS Center upon completion of development. CARITAS Center Tenant, LLC is owned 90% by CARITAS Structure, Inc. and 10% by the Affiliate Interest.

2. Summary of Significant Accounting Policies: Basis of Accounting and Consolidation: The accompanying consolidated financial statements include the resources and financial activities of CARITAS and its subsidiaries: CARITAS Structure, Inc., CARITAS Center, LLC, and CARITAS Center Tenant, LLC (collectively, the “Organization”). All significant inter-company transactions and balances have been eliminated in consolidation. The consolidated financial statements have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States ("GAAP") as determined by the Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC"). Non-Controlling Interest: In connection with the development of the CARITAS Center, an additional member was admitted to CARITAS Center, LLC and CARITAS Center Tenant, LLC. Capital contributed, plus or minus the applicable allocation of income of loss to the additional member, is presented as non-controlling interest in the accompanying consolidated financial statements. The additional member is currently a related party to CARITAS but ownership is expected to transfer to an unrelated party within the next 12 months. Use of Estimates in the Preparation of Consolidated Financial Statements: The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Cash and Cash Equivalents: The Organization considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents.

Unconditional Promises to Give: Unconditional promises to give are recorded as received. An allowance is provided for amounts estimated to be uncollectible. Management does not believe an allowance is necessary at June 30, 2018 and 2017. Unconditional promises to give, that are due in the next year, are recorded at their net realizable value. When required, unconditional promises to give, that are due in subsequent years, are reported at the estimated present value using a risk free rate.

CARITAS


15

2. Summary of Significant Accounting Policies, Continued: Inventory: Inventory of donated goods to the CARITAS Furniture Bank is stated at the fair market value as determined by the lower of cost or market. Goods are accounted for on the first-in, first-out (“FIFO”) method. Property and Equipment: Property and equipment are stated at cost or estimated fair market value if donated. Depreciation of property and equipment is computed on the straight-line method over the estimated useful lives of the related assets as follows:

Building 7-39 yearsLeasehold improvements 2-7 yearsEquipment 5-10 yearsVehicles 3-5 years

Interest expense incurred on long-term debt and other financing used for construction of property is capitalized as incurred. Investments: The Organization invests in a professionally managed portfolio that contains bonds of publicly traded companies, mutual funds, and money market funds. Such investments are exposed to various risks such as interest rate, market and credit. Due to the level of risk associated with such investments and the uncertainty related to changes in the value of such investments, it is at least reasonably possible that changes in risks in the near term would materially affect investment balances and the amounts reported in the accompanying consolidated financial statements. Investments are reflected at fair market value as described in Note 7. Unrealized gains and losses are reported in the accompanying Consolidated Statements of Activities. Net Assets: The Organization classifies its net assets into three categories: unrestricted, temporarily restricted, and permanently restricted.

Unrestricted net assets - Funds that are not subject to donor-imposed stipulations. Unrestricted assets include $841,805 of board-designated net assets. Temporarily restricted net assets - Funds subject to donor-imposed stipulations that may or will be met, either by actions of the Organization and/or the passage of time. When a restriction expires, temporarily restricted net assets are reclassified to unrestricted net assets and reported in the accompanying Consolidated Statements of Activities as net assets released from restrictions.

CARITAS


16

2. Summary of Significant Accounting Policies, Continued: Net Assets, Continued:

Permanently restricted net assets - Funds subject to donor-imposed stipulations that will be maintained permanently by the Organization. Generally, the donors of these assets permit the Organization to use part of the income earned on any related investments for general or specific purposes. The Organization had $68,598 of permanently restricted net assets at June 30, 2018 and 2017.

Contributions: All contributions are considered to be available for unrestricted use unless specifically restricted by the donor. Other than for contributions restricted for long-term purposes, support that is restricted is reported as an increase in unrestricted net assets if the restriction expires or is satisfied in the reporting period in which the support is recognized. In-Kind Contributions: The value of in-kind contributions that either (a) created or enhanced a nonfinancial asset or (b) required specialized skills, were provided by individuals possessing those skills, and would typically need to be purchased if they had not been contributed, is recorded as a contribution at fair value in the period received. Contributed property and equipment and inventory is recorded at fair value. During the years ended June 30, 2018 and 2017, the Organization received $661,648 and $756,563, respectively, of donated furniture for distribution through its Furniture Bank program. Income Taxes: The Internal Revenue Service (the “IRS”) has determined that CARITAS is exempt from Federal income tax under Section 501(c)(3) of the Internal Revenue Code (the “IRC” or “the Code”). However, income from certain activities not directly related to CARITAS’s tax-exempt purpose is subject to taxation as unrelated business income. Contributions to the Organization are tax deductible as defined by Section 170 of the Code. In addition, the IRS has determined that the Organization is not a “private foundation” within the meaning of Section 509(a) of the Code. CARITAS Structure, Inc. is taxed as a corporation for federal and Virginia income tax purposes. Due to anticipated operating and tax losses, CARITAS Structure, Inc. has not recorded any deferred income tax benefits for net operating loss carryforwards. For income tax purposes, CARITAS Structure, Inc., CARITAS Center, LLC, and CARITAS Center Tenant, LLC report on a calendar year basis. CARITAS Center, LLC and CARITAS Center Tenant, LLC are considered disregarded entities for tax purposes and instead, their members are taxed on their proportionate share of these entities’ taxable income or loss.

CARITAS


17

2. Summary of Significant Accounting Policies, Continued:

Income Tax Uncertainties: The Organization follows FASB guidance for how uncertain tax positions should be recognized, measured, disclosed and presented in the consolidated financial statements. This requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Organization’s tax returns to determine whether the tax positions are "more-likely-than-not" of being sustained "when challenged" or "when examined" by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold would be recorded as a tax expense and liability in the current year. Management evaluated the Organization’s tax position and concluded that the Organization had taken no uncertain tax positions that require adjustment to the consolidated financial statements to comply with the provisions of this guidance. The Organization is not currently under audit by any tax jurisdiction. Functional Allocation of Expenses: The costs of providing various programs and other activities have been summarized on a functional basis in the accompanying Consolidated Statements of Activities. Accordingly, certain costs have been allocated among the programs and supporting services benefited. Concentrations of Credit Risk: At June 30, 2018 and 2017, deposits were insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000 per financial institution. The Organization maintains cash balances at several financial institutions and at times, the balances exceed the insured amounts. As of June 30, 2018, the Organization had $257,912 in excess of the federally insured limits. As of June 30, 2017, the Organization had $244,344 in excess of the federally insured limits. Unconditional promises to give are from individuals, corporations, and foundations. The Organization believes its credit risk related to these receivables is limited due to the nature of its donors. As of June 30, 2018 and 2017, one donor accounted for 39% and 38%, respectively, of unconditional promises to give. For the year ended June 30, 2018, one donor accounted for 16% of grants and contributions and for the year ended June 30, 2017, two donors accounted for 32% of grants and contributions. Reclassification: Certain prior year balances have been reclassified to conform to the current year presentation.

CARITAS


18

3. Unconditional Promises to Give:

Unconditional promises to give were as follows at June 30, 2018 and 2017:

2018 2017

Due within one year 2,256,296$ 985,248$ Due in one to five years 2,880,841 350,101

Gross unconditional promises to give 5,137,137 1,335,349

Less discount to present value, discount rate of

3.4% for 2018 and 2.4% for 2017 (94,728) (9,357)

5,042,409$ 1,325,992$

4. Property and Equipment:

Property and equipment consists of the following at June 30, 2018 and 2017:

2018 2017

Land 266,000$ 266,000$ Building 3,121,631 3,121,631 Leasehold improvements 43,263 43,263 Equipment 553,699 537,011 Vehicles 174,400 177,540 Construction work in progress 3,062,040 572,962

7,221,033 4,718,407 Less: accumulated depreciation 1,772,664 1,649,080

Property and equipment, net 5,448,369$ 3,069,327$

Construction work in progress consists of site planning, land, and development costs for the CARITAS Center. The land was purchased during 2018 and development is in progress, with expected completion in fiscal year 2020. Depreciation will begin when the project is complete and in-service. For other depreciable categories of property and equipment, depreciation expense totaled $123,584 and $131,683 for 2018 and 2017, respectively.

CARITAS


19

5. Investments in Marketable Securities:

Investments in marketable securities as of June 30, 2018 and 2017 are as follows:

Cost Market Value Cost Market Value

Equities 302,947$ 468,220$ 280,990$ 420,384$ Fixed income 142,546 141,214 148,308 149,764

Cash equivalents 4,671,833 4,671,833 1,878,184 1,878,184

5,117,326$ 5,281,267$ 2,307,482$ 2,448,332$

2018 2017

6. Beneficial Interest in Assets Held at The Community Foundation: On September 18, 2007, CARITAS entered into an agreement with The Community Foundation Serving Richmond and Central Virginia (“TCF”) to create an agency endowment fund (the “Fund”) as described under FASB ASC 958-20, “Financially Interrelated Non-profit Entities”. The Board of Directors designated $500,000 to be transferred to establish the endowment and recorded it as a “Beneficial interest in assets held at The Community Foundation”. Under the terms of the agreement, variance power was granted to TCF, including the power for TCF’s Board of Governors to modify any restrictions or conditions on the distribution of the funds for any specified charitable purpose or to specified organizations, if in their sole judgment, such restriction or condition becomes incapable of fulfillment. Endowment spendable income shall be determined each year to be not more than 4% of the Fund’s balance at the prior calendar year-end. In addition to the aforementioned spendable income, upon a vote of 75% of all members of the CARITAS Board of Directors, and not more than once in any five-year period, up to 10% of the prior calendar year-ending fund balance may be requested for capital or emergency purposes. Any spendable income not requested by the CARITAS Board of Directors within a given calendar year will be added to the Fund’s principal balance. No additional contributions were made to the endowment account in 2018 or 2017. Activity in the Fund was as follows for the years ended June 30:

2018 2017

Balance, beginning of year 647,628$ 608,932$ Unrestricted support to TCF (6,585) (6,225)

Spendable income released (24,258) (24,360)

Net investment income 54,360 69,281

Balance, end of year 671,145$ 647,628$

CARITAS


20

7. Fair Value Measurements:

The Organization has adopted FASB guidance on fair value measurements. The provisions of the guidance provides a framework for measuring fair value under GAAP and defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. This guidance requires that valuation techniques maximize the use of observable inputs and minimize the use of unobservable inputs. This guidance also establishes a fair value hierarchy which prioritizes the valuation inputs into three broad levels.

Based on the underlying inputs, each fair value measurement in its entirety is reported in one of three levels:

Level 1 – Quoted prices in active markets for identical assets or liabilities at the measurement date

Level 2 – Directly or indirectly observable valuations in the marketplace at the measurement date other than Level 1 inputs

Level 3 – Valuations unobservable in the marketplace at the measurement date

The following table provides fair value measurement information for financial assets and liabilities measured at fair value on a recurring basis as of June 30:

Level 1 Level 2 Level 3 Total

Unconditional promises

to give, net -$ -$ 5,042,409$ 5,042,409$ Investments in

marketable securities 5,281,267 - - 5,281,267 Beneficial interest in

assets held at TCF - - 671,145 671,145

5,281,267$ -$ 5,713,554$ 10,994,821$

Level 1 Level 2 Level 3 Total

Unconditional promises

to give, net -$ -$ 1,325,992$ 1,325,992$ Investments in

marketable securities 2,448,332 - - 2,448,332 Beneficial interest in

assets held at TCF - - 647,628 647,628

2,448,332$ -$ 1,973,620$ 4,421,952$

2017

2018

CARITAS


21

7. Fair Value Measurements, Continued: Unconditional promises to give, net are valued at the net realizable value using a quoted discount rate. The following table provides reconciliation between the beginning and ending balances of unconditional promises to give, net measured at fair value on a recurring basis using Level 3 inputs:

Balance, July 1, 2016 452,972$ Payments (452,972) New promises to give 1,335,349 Change in discount (9,357)

Balance, June 30, 2017 1,325,992 Payments (960,790) New promises to give 4,762,578 Change in discount (85,371)

Balance, June 30, 2018 5,042,409$ Investments in marketable securities and mutual funds are actively traded and are valued at the closing stock price or daily net asset value per share. The fair value of beneficial interest in assets held at TCF is based on the fair value of the underlying assets based on available information. A reconciliation of the beginning and ending balances of the beneficial interest in assets held at TCF measured at fair value on a recurring basis using Level 3 inputs is presented in Note 6.

8. Funds Held For Others: The Organization holds funds on behalf of the following:

2018 2017

Clients 31,454$ 39,330$ Other organizations 8,829 11,432

40,283$ 50,762$

CARITAS


22

9. Line of Credit: The Organization has a variable rate revolving line of credit from Union Bank in the amount of $200,000. This line of credit is secured by an original deed of trust on the Organization’s land and building. Payments of interest only are due monthly, with principal and all accrued unpaid interest due upon demand. The interest rate is the bank’s prime rate plus 1%, rounded up to the nearest 0.125%, with an interest rate floor of 5.50%, (6% at June 30, 2018). The line of credit expires on February 1, 2019. There were no borrowings on the line of credit during the years ended June 30, 2018 and 2017.

10. Long-Term Debt and Other Financing:

As of June 30, 2017, the Organization held a deed of trust note payable that was set to mature on September 11, 2018. The Organization made monthly payments of $12,000 which included principal and interest at 3.40% and paid the note in full in June 2018. The note was collateralized by the Organization’s land and building. Interest expense totaled $5,355 for 2018 and $8,438 for 2017. In connection with the planned development of the CARITAS Center, CARITAS Center, LLC entered into two deed of trust notes with the seller of a warehouse building and land totaling $1,475,000 (“purchase note”) and $500,000 (“demolition note”). The purchase note was used to finance the building and land purchase on December 21, 2017 and required monthly payments of interest only at 1.38% through June 30, 2018, at which time all unpaid principal and interest was due. Draws on the demolition note were made at various times between April and May 2018 and those advances also bore interest at 1.38%. All principal and unpaid interest were paid in full on both notes on June 28, 2018. Total interest of $16,802 was capitalized into construction work in process as a cost of development.

11. Temporarily Restricted Net Assets: Temporarily restricted net assets are held by CARITAS and are restricted for the following purposes at June 30:

2018 2017

General purposes - future years 270,490$ 104,078$ The CARITAS Center 9,230,325 3,085,589

9,500,815$ 3,189,667$

CARITAS


23

11. Temporarily Restricted Net Assets, Continued:

Amounts released from restriction were as follows for the years ended June 30:

2018 2017

General purposes - future years 104,078$ 205,439$ The CARITAS Center 2,489,078 300,193

2,593,156$ 505,632$

12. Leasing Activities: The Organization leases residential properties month-to-month for use in support of its programs at monthly rental rates ranging from $500 to $1,083. Total lease expense for the properties totaled $119,456 and $127,116 for the years ended June 30, 2018 and 2017, respectively. The Organization leased warehouse space requiring a monthly rental of $5,800 through June 2018. Lease expense for the warehouse totaled $63,800 and $69,600 for the years ended June 30, 2018 and 2017, respectively. The Organization subleased space in the storage warehouse to another organization through June 2018 at a monthly rate of $1,961 plus $800 in reimbursements for utilities and janitorial work. Total rental income related to this lease and other rental activities totaled $26,462 and $31,547 for 2018 and 2017, respectively. The Organization entered into a lease beginning in June 2018 for temporary use as the Furniture Bank. The lease requires monthly payments of $6,300 through October 31, 2019. The Organization also leases office equipment under a lease agreement through March 2020. Rent expense under these leases totaled $21,045 and $15,377 for the years ended 2018 and 2017, respectively. Future minimum payments related to these leases are as follows:

Year Ending June 30, Amount

2019 83,916$

2020 31,124

115,040$ On December 1, 2016, the Organization entered into agreements to lease two trucks through November 2020. The vehicles and related capital lease obligations were recorded at the lower of the present value of the minimum lease payments or the fair value of the vehicles. The vehicles are depreciated over the lower of their lease terms or their estimated useful lives and is included in depreciation expense in the accompanying consolidated financial statements.

CARITAS


24

12. Leasing Activities, Continued:

Depreciation of vehicles under capital leases charged to expense totaled $15,912 for 2018 and $9,283 for 2017. A summary of property held under capital leases included in Property and Equipment is as follows:

Vehicles 63,648$ Less: accumulated depreciation (25,195)

38,453$

Future minimum lease payments under capital leases as of June 30, 2018 are as follows:

Year Ending June 30, Amount

2019 16,704$ 2020 16,704

2021 6,960

40,368

Less: interest (1,139)

39,229$

13. Commitments and Contingencies:

As a component of planning for development of The CARITAS Center, the Organization has various contracts for design, development, and construction. The Organization can discharge the vendors at any time and only amounts incurred for completed work would be due. The Organization is pursuing Historic Tax Credits (“HTC”) and New Market Tax Credits (“NMTC”) related to the qualified expenditures by CARITAS Center, LLC. for the development of the CARITAS Center. Receipt of the tax credits is contingent on maintaining compliance with applicable sections of the Internal Revenue Code and other regulatory requirements.

14. Retirement Plan:

The Organization sponsors a 403(b) plan for all full-time salaried employees whereby employees’ contributions are matched 50%, up to a maximum of 4% of their salary reduction contributions. The Organization’s total contributions were $29,698 for 2018 and $29,883 for 2017.

CARITAS


25

15. Subsequent Events: Management has evaluated subsequent events for potential recognition and/or other disclosure through November 14, 2018, the date the consolidated financial statements were available to be issued. In connection with the development of CARITAS Center, numerous contracts for development and construction have been entered. In addition, the Organization is finalizing financing terms. Other than these items, there are no subsequent events to be reported in the accompanying consolidated financial statements.

16. Prior Period Adjustments – Correction of an Error:

During 2018, the Organization determined it did not properly capitalize expenses related to the development of the CARITAS Center as construction work in process during 2016 and 2017. Accordingly, in the accompanying consolidated financial statements, the previously reported 2017 beginning net assets and property and equipment balances were increased by $9,280 and the previously reported 2017 change in net assets was increased by $28,798 to reflect this restatement. The 2017 ending net assets and property and equipment balances were increased by $38,078 to reflect the cumulative impact of the error.

17. New Accounting Guidance: Financial Reporting: In August 2016, FASB issued Accounting Standards Update (“ASU”) No. 2016-14, “Not-For-Profit Entities (Topic 958): Presentation of Financial Statements of Not-For-Profit Entities”, which both simplifies certain aspects of reporting required by not-for-profit organizations and increases disclosures with a goal to improve the usefulness of not-for-profit financial statements to the various stakeholders, including management, directors, lenders, and donors. Significant changes include the following:

Replaces the existing three classes of net assets (unrestricted, temporarily

restricted, and permanently restricted) with two new classes of net assets—net assets with donor restrictions and net assets without donor restrictions

Requires all not-for-profits to provide expenses by nature and function Requires expansive disclosures (both quantitative and qualitative) of information

about liquidity and availability of resources

The amendments in this ASU are effective for fiscal years beginning after December 15, 2017 with early adoption permitted. The Organization plans to adopt this ASU as of the required transition date.

CARITAS


26

17. New Accounting Guidance, Continued:

Revenue Recognition: In 2014, the FASB issued ASU 2014-09 which defines a five step process to ensure revenue is recognized when a customer has control over a good or service. The standard also requires enhanced disclosures in the financial statements including both qualitative and quantitative information, significant judgments involved in the process, and the amount and timing of performance obligations. The standard is effective for private companies for fiscal years beginning after December 15, 2018, with early adoption permitted. The Organization is currently evaluating the implications of this new standard.

Leases: In February 2016, the FASB issued ASU 2016-02 “Leases”, which requires that all leasing activity with initial terms in excess of twelve months be recognized on the statement of financial position with a right of use asset and a lease liability. The standard will require entities to classify leases as either a finance, or operating lease based upon the contractual terms. The standard is effective for private companies for fiscal years beginning after December 15, 2019, with early adoption permitted. The Organization is current evaluating the implications of this new standard.

SUPPLEMENTAL INFORMATION

CARITAS

Consolidating Schedule – Statement of Financial Position June 30, 2018

See report of independent accountants. 27

Assets CARITAS

CARITAS

Structure, Inc.

CARITAS

Center, LLC

CARITAS

Center Tenant,

LLC

Consolidating

Entries Consolidated

Current assets:

Cash and cash equivalents 1,023,048$ 910$ 28,770$ 2,000$ -$ 1,054,728$ Unconditional promises to give, current 2,256,296 - - - - 2,256,296 Investments in marketable securities 5,281,267 - - - - 5,281,267 Inventory 96,685 - - - - 96,685 Prepaid expenses 14,916 - - - - 14,916 Due from related party 2,810,136 - - 8,000 (2,818,136) - Deposits 15,065 - 5,000 - - 20,065

Total current assets 11,497,413 910 33,770 10,000 (2,818,136) 8,723,957

Property and equipment, net 2,386,329 - 3,062,040 - - 5,448,369

Other assets:Unconditional promises to give, net of current

portion and discount 2,786,113 - - - - 2,786,113 Investment in CARITAS Structure, Inc. 117,412 - - - (117,412) - Investment in CARITAS Center, LLC - 2,925,638 - - (2,925,638) - Investment in CARITAS Center Tenant, LLC - 9,000 - - (9,000) - Beneficial interest in assets held at

The Community Foundation 671,145 - - - - 671,145

Total other assets 3,574,670 2,934,638 - - (3,052,050) 3,457,258

Total assets 17,458,412$ 2,935,548$ 3,095,810$ 10,000$ (5,870,186)$ 17,629,584$

CARITAS

Consolidating Schedule – Statement of Financial Position, Continued June 30, 2018


Liabilities and Net Assets CARITAS

CARITAS

Structure, Inc.

CARITAS

Center, LLC

CARITAS

Center Tenant,

LLC

Consolidating

Entries Consolidated

Current liabilities:

Accounts payable and accrued expenses 104,788$ -$ 169,172$ -$ -$ 273,960$ Funds held for others 40,283 - - - - 40,283 Due to related party - 2,818,136 - - (2,818,136) - Current portion of capital lease obligation 15,514 - - - - 15,514

Total current liabilities 160,585 2,818,136 169,172 - (2,818,136) 329,757

Non-current liabilities:

Capital lease obligation, net of current portion 23,715 - - - - 23,715

Total liabilities 184,300 2,818,136 169,172 - (2,818,136) 353,472

Net assets / equity:Unrestricted:

Undesignated - available for general activities 6,862,894 117,412 2,925,638 9,000 (3,052,050) 6,862,894 Board designated for an operating reserve 215,000 - - - - 215,000 Board designated - assets held at

The Community Foundation 626,805 - - - - 626,805

7,704,699 117,412 2,925,638 9,000 (3,052,050) 7,704,699 Temporarily restricted 9,500,815 - - - - 9,500,815 Permanently restricted 68,598 - - - - 68,598

Total controlling interest in net assets/equity 17,274,112 117,412 2,925,638 9,000 (3,052,050) 17,274,112

Non-controlling interest - - 1,000 1,000 - 2,000

Total net assets/equity 17,274,112 117,412 2,926,638 10,000 (3,052,050) 17,276,112

Total liabilities and net assets/equity 17,458,412$ 2,935,548$ 3,095,810$ 10,000$ (5,870,186)$ 17,629,584$

CARITAS

Consolidating Schedule – Statement of Activities Year Ended June 30, 2018


CARITAS

Structure, Inc.

CARITAS

Center, LLC

CARITAS

Center

Tenant, LLC

Consolidating

Entries


Capital campaign for the CARITAS Center 8,633,814$ -$ -$ -$ -$ 8,633,814$ Congregations, individuals and business 1,159,454 - - - - 1,159,454 Foundations 643,539 - - - - 643,539 In-kind contributions 661,648 - - - - 661,648 Government funding 819,822 - - - - 819,822 United Way Service 193,787 - - - - 193,787 AmeriCorps 228,709 - - - - 228,709

Program fees 425,746 - - - - 425,746 Special event income 73,630 - - - - 73,630 Special projects revenue 145,328 - - - - 145,328 Miscellaneous revenue 28,781 - - - 32,588 61,369 Change in value of beneficial interest in

assets held at The Community Foundation 47,775 - - - - 47,775 Rental income 26,462 - - - - 26,462 Realized gain on sale of investments 19,765 - - - - 19,765 Unrealized gain on investments 21,210 - - - - 21,210 Gain on sale of equipment 3,360 - - - - 3,360 Interest income 32,498 - - - (32,498) - Investment income 37,890 - - - - 37,890

Total revenue and support 13,203,218 - - - 90 13,203,308

Program services 3,733,309 - - - - 3,733,309 Management and general 383,835 32,588 - - (32,498) 383,925 Fundraising 298,746 - - - - 298,746

Total expenses 4,415,890 32,588 - - (32,498) 4,415,980

Change in net assets 8,787,328 (32,588) - - 32,588 8,787,328

Controlling interest in net assets, beginning of year, as restated (see Note 16) 8,486,784 - - - - 8,486,784

Equity contributions - 150,000 2,925,638 9,000 (3,084,638) -

Total controlling interest in net assets, end of year, before non-controlling interest 17,274,112 117,412 2,925,638 9,000 (3,052,050) 17,274,112

Non-controlling interest, end of year - - 1,000 1,000 - 2,000

Total net assets/equity, end of year 17,274,112$ 117,412$ 2,926,638$ 10,000$ (3,052,050)$ 17,276,112$

CARITAS

Consolidated

Total

10 4 Financial Statements-Word - Amazon Web Services · 4401 Dominion Boulevard Glen Allen, Virginia 23060 Tel: 804.747.0000 CARITAS Consolidated Financial Statements June 30, 2018

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